Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Northern Dynasty Minerals Rose as Much as 10.2% Today

By Maxx Chatsko - Feb 8, 2018 at 12:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The stock continues to whipsaw.

What happened

Shares of prospective precious metals miner Northern Dynasty Minerals (NAK 1.38%) rose more than 10% Thursday, before falling back to ground level, after an article published Wednesday on Seeking Alpha claimed that the all-important partnership with copper mining giant First Quantum Minerals is on target and should be signed "in the very near term."

Unfortunately, there aren't any real world indications supporting either side of the argument -- finalizing a proposed partnership or backing out -- at this time. The only certainty is uncertainty, although investors may receive an answer soon. As of 11:48 a.m. EST, the stock had settled to a 5.1% gain.

A chart drawn on a chalk board with a positive slope, but then erased and redrawn with a negative slope.

Image source: Getty Images.

So what

Northern Dynasty Minerals stock cratered in recent weeks after the U.S. Environmental Protection Agency made a surprise move to reinstate protections for the sockeye salmon fisheries in Bristol Bay, Alaska. The agency previously removed protections, which was a sign that it would allow the company's nearby Pebble Project -- the world's largest undeveloped copper and gold mine -- to proceed with permitting and a multi-year development process. Now the EPA admits there's a high bar to clear for any mining project, which has spooked investors.

It's important to note that the EPA's decision doesn't derail Pebble and may not affect the development timeline. But considering that the mine isn't expected to be in production until 2024, investors wouldn't easily stomach a delay.

More importantly, increased scrutiny from the EPA could become a factor for First Quantum Minerals, which has the option to partner on Pebble. Since it hasn't finalized its role in the project and could still walk away, it's the biggest near-term consideration for investors. They may get an answer on the copper mining giant's decision on Feb. 12, when the company announces full-year 2017 earnings.

Now what

Investors should expect Northern Dynasty Minerals to remain volatile for the foreseeable future. If First Quantum Minerals publicly and unequivocally states its commitment to developing Pebble, then the market can breathe a sigh of relief and turn its attention to the long road ahead. If the larger miner withdraws from the proposed partnership, then it could spell the end of the prospective miner altogether. That's just one reason I wouldn't consider this stock for an investment.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Northern Dynasty Minerals Ltd. Stock Quote
Northern Dynasty Minerals Ltd.
NAK
$0.26 (1.38%) $0.00
First Quantum Minerals Ltd. Stock Quote
First Quantum Minerals Ltd.
FQVLF
$18.85 (-0.71%) $0.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.